Presentation Footer1 The South African Institute of Chartered Accountants (SAICA) presentation to the Standing Committee on Finance Presented by: Piet Nel: Project director: Tax Wessel Smit Member of SAICA’s tax committee

2 SAICA presentation to ScoF – August August 2012 Presentation to ScoF Retrospective effective dates Employer provided motor vehicle Fringe benefits International tax Sundry and other issues Additional medical expenses tax credit Debt reductions for less than full consideration Fair value and market-to-market

3 Retrospective proposed dates of commencement Draft Taxation Laws Amendment Bill, 2012 Hybrid equity – 1 April 2012 SAICA presentation to ScoF – August 2012 The effective date of the increase in the dividends tax rate and other related amendments Rates and Monetary Amounts and Amendment of Revenue Laws Bill Draft Taxation Laws Amendment Bill, 2012 Amendments to the dividends tax legislation – 1 April 2012 Dividends declared by listed companies (dividends tax) Draft Tax Administration Amendment Bill, 2012,

4 Additional medical expenses tax credit Pages 2 – 4 of the SAICA submission Not clear how it will apply in cases of superannuation, ill-health or other infirmity Impact on payroll systems (PAYE) SAICA presentation to ScoF – August 2012 It does not recognise the expected increase in cost of medical care For taxpayers under 65 (25% and 7,5%) limited instances where deduction will be available where the individual turns 65 during a year of assessment

5 Employer provided motor vehicle Pages 6 – 12 of the SAICA submission ‘operating lease’ ‘the actual cost to the employer incurred under that operating lease’ The treatment of the cost of fuel SAICA presentation to ScoF – August 2012 The definition of an operating lease (as defined in section 23A of the Income Tax Act) is too narrow. Not clear what this must include

6 Debt reductions for less than full consideration Page 27 of the SAICA submission Reduction in base cost of assets The interaction between section 19 and section 24J(4A) where the debt reduction relates to a financial instrument The capital gain legislation provided relief for liquidating companies in certain instances SAICA presentation to ScoF – August 2012 The link with the capital gain provisions must be made (paragraph 20(3)(b)) The debt reduction regime should provide similar relief

7 Fair value and market-to- market Page of the SAICA submission Proposed effective date of 31 December 2012 to be reconsidered A definition of ‘hedge’ or ‘hedging‘ needs to be included in the legislation Expanded definition of ‘covered persons’ SAICA presentation to ScoF – August 2012 Complex legislation Impact of fair value accounting on previous global financial crisis IFRS might change – could effect tax legislation

8 International tax Page 45 – 52 of the SAICA submission Definition of resident:Effective management – 75% rule The post-transaction requirement for cross-border asset-for-share transactions – the law does not give effect to the intention as expressed in the Memorandum SAICA presentation to ScoF – August 2012

9 Sundry issues Mentioned in budget – not addressed in the draft legislation Provisional tax Addressed in the Draft Tax Administration Amendment Bill SAICA presentation to ScoF – August 2012 Clarification of date of registration for value-added tax purposes Introduction of compulsory (automatic) penalty questioned Regulation of tax practitioners Addressed in the Draft Tax Administration Amendment Bill Introduction of controlling bodies and the regulatory body

10 Other matters raised in the SAICA submission Interest incurred in acquisition transactions Corporate rules Residential – stand alone submission SAICA presentation to ScoF – August 2012 The final dividend cycle and the STC credits Fringe benefits

11 We thank you for your time